Tag Archives: premium rates

State of the 2018 Medicare Advantage industry: Stable and growing

Each Medicare Advantage (MA) plan has an associated “value added,” defined as the value of benefits provided to a specific plan’s beneficiaries above traditional Medicare that are not funded through member premiums. This report by Milliman actuaries Julia Friedman and Brett Swanson highlights key changes in beneficiary premiums and benefits for the 2018 MA market. The report also examines the reasons for, and the magnitude of, the decrease in value added within the MA market between 2014 and 2016 as well as the increases in value added in 2017 and 2018. The report aims to assist Medicare Advantage organizations in making strategic decisions during 2019 bid preparations.

Increasing ACA plan premiums show that age is not just a number

In 2018, the federal age curve of the Patient Protection and Affordable Care Act (ACA) is changing for the first time. As a result, ACA premiums for individuals under 21 years of age will increase. It is important for health insurers to develop a communications plan that will explain to members why their premiums are increasing.

In their article “Are health carriers ready to explain the 2018 age curve?,” Milliman’s Amy Giese and Nicholas Krienke outline the ways carriers can communicate with members. The authors also discuss some underlying issues carriers must consider to effectively communicate the age curve’s effect on premiums.

What issues may affect 2017 ACA rates?

As 2016 approaches, healthcare insurers should already be thinking about the 2017 premium rates they will need to file for their Patient Protection and Affordable Care Act (ACA) business. In the article “Ten potential drivers of ACA premium rates in 2017,” Milliman’s Aaron Wright, Hans Leida, and Lindsy Kotecki discuss several factors that may influence ACA plan rates moving forward. The factors are listed below.

1. Trend.
2. Changes to essential health benefits and the Centers for Medicare and Medicaid Services (CMS) Actuarial Value Calculator.
3. Additional data.
4. Continued migrations.
5. Carrier shuffling.
6. Ongoing political uncertainty: Court cases and elections.
7. Transitional reinsurance.
8. Risk corridors.
9. Risk adjustment.
10. Changes in fees and taxes.

Rates changing on the ACA marketplace

Premium rates for plans in the 38 federally facilitated and state partnership health insurance marketplaces have increased overall in 2016 as compared with 2015. A new Milliman analysis shows states with fewer carriers tended to have higher rate increases. Other known factors that have contributed to overall rate increases include increases in the transitional reinsurance program’s attachment point and government fees. In this article, Milliman’s Samuel Bennett highlights each marketplace average rate and unique carrier change by state. Figure 1 below shows the comparisons between 2015 and 2016.

Figure 1: Individual Market Comparison Between 2015 and 2016

State Second-Lowest-Cost Silver Plan Premium Rate (27-year old)*
Percent
Change**
Number of Carriers Offering Plans in the State Percent
Change
(c) = (a)/(b) – 1
2016 2015 2016(a) 2015(b)
Alaska $590 $449 32% 2 2 0%
Alabama $244 $216 13% 3 3 0%
Arkansas $244 $235 4% 4 3 33%
Arizona $189 $161 18% 8 10 -20%
Delaware $292 $247 18% 2 2 0%
Florida $237 $235 1% 8 9 -11%
Georgia $236 $228 4% 9 8 13%
Iowa $245 $217 13% 4 3 33%
Illinois $203 $192 6% 8 7 14%
Indiana $235 $268 -12% 8 8 0%
Kansas $217 $187 16% 3 4 -25%
Louisiana $290 $267 9% 4 4 0%
Maine $260 $263 -1% 3 3 0%
Michigan $212 $209 1% 12 12 0%
Missouri $257 $233 10% 6 6 0%
Mississippi $230 $255 -10% 3 3 0%
Montana $264 $196 35% 3 3 0%
North Carolina $318 $259 23% 3 3 0%
North Dakota $270 $248 9% 3 3 0%
Nebraska $272 $243 12% 4 2 100%
New Hampshire $215 $205 5% 5 4 25%
New Jersey $272 $259 5% 4 5 -20%
New Mexico $205 $163 26% 3 5 -40%
Nevada $235 $217 8% 3 4 -25%
Ohio $221 $218 1% 15 14 7%
Oklahoma $251 $185 36% 2 3 -33%
Oregon $226 $183 23% 10 10 0%
Pennsylvania $214 $193 11% 7 9 -22%
South Carolina $247 $223 11% 3 3 0%
South Dakota $270 $216 25% 2 3 -33%
Tennessee $236 $191 23% 4 3 33%
Texas $220 $211 4% 14 13 8%
Utah $245 $212 16% 4 6 -33%
Virginia $240 $230 4% 7 6 17%
Wisconsin $262 $251 5% 16 15 7%
West Virginia $294 $248 18% 2 1 100%
Wyoming $379 $359 6% 1 2 -50%
Hawaii*** $213 n/a n/a 2 n/a n/a

* U.S. Department of Health and Human Services Assistant Secretary for Planning and Evaluation (ASPE) premium rates represent the average monthly premiums prior to the application of tax credits.
** Percent change numbers represent those calculated by ASPE.
*** Hawaii started using the federal application system for its state-based individual medical marketplace in 2016. No 2015 data is available for comparison. Note that Hawaii only has one rating area, so no ASPE plan enrollment equivalent was needed to calculate the overall statewide average second-lowest-cost silver plan rate.

Top 10 Milliman blogs for 2013

Milliman publishes blog content addressing complex issues with broad social importance. Our actuaries and consultants offer their perspective on healthcare, retirement plans, regulatory compliance, and more. The list below highlights Milliman’s top 10 blogs in 2013 based on total pageviews:

10. In their blog “Five keys to writing a successful qualified health plan application,” Maureen Tressel Lewis and Bonnie Benson highlight several best practices insurers should consider when submitting a qualified health plan application to the Health Insurance Marketplace.

9. “Understanding ACA’s subsidies and their effect on premiums” offers perspective into the relationship in the Patient Protection and Affordable Care Act (ACA) between healthcare premiums and federal subsidies for low-income individuals.

8. Future funding for the Consumer Operated and Oriented Plan (CO-OP) Program was eliminated as a result of the fiscal deal that was signed in December 2012. Tom Snook takes a look at how the deal affects CO-OPs in his blog “CO-OPs: An endangered species?

7. Robert Schmidt discusses why the methodology used to determine COBRA premium rates is essential in his blog “The growing importance of COBRA rate methodologies.”

6. A second blog by Maureen Tressel Lewis and Mary Schlaphoff entitled “Five critical success factors for participation in exchange markets” highlights tactics that insurers offering qualified health plans may benefit from implementing.

5. “Pension plans: Key dates and deadlines for 2013” offers Milliman’s three retirement plan calendars (defined benefit, defined contribution, and multiemployer) with key administrative dates and deadlines throughout the year.

4. In her blog “Fee leveling in DC plans: Disclosure is just the beginning,” Genny Sedgwick explains how investment expenses and revenue sharing affect the fees paid by defined contribution plan participants.

3. Maureen Tressel Lewis and Mary Schlaphoff’s blog “Five common gaps for exchange readiness” describes items issuers of qualified health plans have to resolve before their plans can be sold on the Health Insurance Marketplace.

2. In the lead-up to implementation of the ACA, debate often centered on how the law would affect healthcare premiums. Our “ACA premium rate reading list” offers perspective on how rates may be affected.

1. In his blog “Retiring early under ACA: An unexpected outcome for employers?,” Jeff Bradley discusses the impact that the ACA could have on both early retirees and plan sponsors.

This article was first published at Milliman Insight.

2015 individual market pricing: Morbidity and other considerations

There are several known regulatory and market changes that will affect the pricing of plans sold on the state exchanges in 2015. Items such as the reduction in the federal transitional reinsurance program and increases in the Patient Protection and Affordable Care Act (ACA) insurer fees will influence pricing. Lack of morbidity data related to new populations of insureds creates a level of uncertainty when pricing risk beyond 2014. However, there are ways to gain additional understanding on morbidity for 2015 pricing compared to the approaches used for 2014.

In this new article, Scott Katterman discusses how insurers can take advantage of data sources to gain some perspective into future pricing. Here is an excerpt from the article:

Reduction of federal transitional reinsurance
To ease the transition to a guaranteed issue environment, ACA includes a federal reinsurance program to help mitigate the risk of extremely high-cost individuals entering the individual market. While the reinsurance program will be a significant help to insurers in 2014, its impact will shrink over time. The budget allocated for reinsurance payments will drop from $10 billion in 2014 to $6 billion in 2015. All else being equal, this will reduce reinsurance payments to individual health plans by 40%. Actuaries estimate that the reinsurance program has reduced premiums by 10% to 15% in 2014, so slimming it down will have a certain and material impact on pricing in 2015.

The bottom-line impact of this shift will depend on the size of the individual market in 2015. If individual market growth is significant in 2015, the transitional reinsurance program payments into the individual market may well go down more than 40% on a per-member basis, simply because the $6 billion budget will be spread across a larger individual market in 2015 relative to 2014. As a result, actuaries need to estimate the size of the (non-grandfathered) individual health insurance market in 2015.

There are reasons to think the market may increase materially, such as increasing tax penalties for remaining uninsured in 2015, as well as organic growth of the market as knowledge of and familiarity with the exchanges increases.

Cohort studies: estimating morbidity using actual 2014 data
A technique that we believe will be useful to many carriers is examining the risk scores of cohorts of the individuals which make up their 2014 insured populations. Risk scores based on prescription drug data are likely to provide the most accurate estimates, since that data will be far more complete at that point compared to medical claims data. Prescription drug risk scores can be calculated for each enrollee based on the few months of 2014 data that will be available. These partial-year risk scores can then be adjusted based on analyses of risk score development and completion patterns from prior years, taking into consideration potential differences in completion patterns for new vs. existing enrollees. These adjustments will allow comparisons of 2014 risk scores to prior year risk scores on a more “apples to apples” basis.

Once risk scores are estimated, the membership can be split into cohorts of new vs. existing members for both 2014 and prior year data. Comparisons can then be performed to help answer the following questions:

• How has the overall risk score of our 2014 population changed compared to 2013?
• How do the risk scores of new 2014 enrollees compare to existing members?
• How do the risk scores of new 2014 enrollees compare to new enrollees in 2013 and prior years?
• Has our existing member block risk score increased significantly due to lapses of younger/healthier individuals?

The answers will be very valuable when developing 2015 premium rates.